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Car-Buying Negotiating Guide

·4-min read
Photo credit: Getty Images
Photo credit: Getty Images

Horse trading has been around since, well, horses, and nothing has changed: The wily salesperson is a professional. And you are an amateur. When it comes to cars, you’re thinking years between purchases, while the salesperson is thinking hours.

The good news is you’ll only get beat if you leave yourself open. Know how to negotiate—what’s on the table, and what isn’t—and you stand a better-than-average chance of driving a good deal.

What isn’t on the table: monthly payments. Walk into a dealership saying, “I can afford $500 a month,” and that’s what you’ll pay. The salesperson can’t wait to hear that figure: He or she knows that you’ll be on the hook in a matter of minutes. They’ll simply extend payments out to 72 or 84 months, give you a little something for your trade-in, and as long as the monthly number is close to $500, you got what you want. It’s the easiest sale the dealer will make all day.

Instead, here’s a list of what you need to know before you walk in the door.

--How much the new car cost the dealer. This information is available from Consumer Reports or other buying sources; it’s called the wholesale price. Know that dealers almost never sell below cost, so if they appear to, there are incentives to the dealer or advertising costs paid by the manufacturer at play.

--How much your trade-in is worth. Again, there are sources for this information like Kelly Blue Book or Edmunds, but also check Craigslist to see what cars like yours are going for. Figure 10 percent less than the asking cost as a ballpark figure. It doesn’t hurt to try and sell the car on your own, but this doesn’t guarantee a good deal, although it’s worth trying Carvana or Vroom to get an offer.

--Know what the difference should be—your car plus money equals their car.

--Figure out how you’ll pay the difference. You can try to get financing on your own, but the dealer, when squeezed, is usually a good source for relatively inexpensive financing through the manufacturer or several lenders.

--Know what features you want on a car. Looking for a new Ford Bronco? Prices start at about $30,000 and go up to $60,000. A red car can cost $1,100 more than a white one. Do you really need a navigation system when there’s one on your phone? Figure out what you can, and can’t, do without. This includes the add-on extras that the F&I person (finance and insurance) will try to sell you before you are allowed to actually buy the car at the agreed-upon price. Again, the ability to walk away will serve you well. Some fees are unavoidable, some are not.

--Check with your insurance agent regarding how much more insurance might be. That can put you over your monthly budget quickly.

With all that knowledge in hand, be aware that from the moment you sit down in the dealership, you’ll be required to stick to your guns. Your greatest weapon is your threat to walk away—make it real. Unless you really live in the boonies, there’s another Ford, Toyota, Kia, or whatever dealer an hour away. Don’t be scared to get up and go there.

Two more considerations: If you are looking for a used car, it’s true that new car dealers have the pick of trade-ins, and are often willing to pay more at auction because they typically charge the most for used cars. The inspected “certified” used cars are usually the cream of the crop, and priced that way.

Buy or lease? If leasing gives you a solid reason to go that route, consider it, especially if you rack up minimal miles, and there’s a special lease deal available that you like. If you have a trade-in, though, we’re back to negotiating what it’s worth.

Consider that if you prepare for five hours and save $500, you’ve just earned a hundred bucks an hour. Don’t get caught up in the feeling that you’ve negotiated this much, you might as well go ahead a pull the trigger—dealers often count on an overwhelmed customer.

And don’t expect a dealer to fold, either, especially if you’re looking at a hot model. Negotiate, meet in the middle, be reasonable, and everyone goes home happy.

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